Tanzania: New gas entrants likely as industrialisation gathers pace, Wentworth CEO says

The combination of well-developed energy infrastructure, a growing population and increasing GDP makes Tanzania a uniquely attractive proposition, Roe says. The environment under Hassan “feels different” than under her late predecessor John Magafuli. “It does feel more business-friendly. The president is supportive of opening up Tanzania and positioning it as an east African energy hub.”

Hassan is aiming to transform Tanzania into a semi-industrialized, lower-middle-income country by 2025, with a longer-term to increase generation capacity to 5GW by 2025 and 18GW by 2044. Roe expects that Tanzania’s current population of about 60m will increase to 85m by 2035. Only about 38% of the population is currently connected to electricity.

Natural gas from the Mnazi Bay facility in the south of the country has helped to increase access. About 30% of Tanzanian energy demand is currently met from Mnazi Bay, with gas being fed into a pipeline to Dar es Salaam. Wentworth has a 32% stake in the asset, France’s Maurel & Prom 48%, and the Tanzania Petroleum Development Corp 20%.

Roe aims to increase output from Mnazi Bay from the current 100m cubic feet per day to 130m by 2025 or sooner. No other east African country has such pipeline infrastructure in place, and demand is increasing driven by industrialisation, she says.  “The industrialisation of Tanzania is the step change.”

• Mnazi Bay and Songo Songo island are the main gas producing assets in Tanzania. The fact that better fiscal terms are available in other countries is part of the reason that there are only two, Roe says. Wentworth’s low-cost operations make it possible to be profitable, she adds.
• Wentworth, which trades on London’s AIM stock market, is debt-free and had $22.8m of cash at the end of 2021. The balance sheet gives the company “credibility and flexibility to produce growth,” Roe says. There is, she says, a “risk of having all the eggs in one basket.”

Diesel Displacement

In May Fitch Solutions predicted that Tanzania’s real GDP growth will accelerate from an estimated 4.9% in 2021 to 5.2% in 2022, which will support job creation and reduce the risk of social unrest. Fitch forecasts that the construction industry will grow by 13.1% in 2022 and 12.6% in 2023.

Hassan has resumed talks with multinational corporates on plans to develop the country’s liquefied natural gas (LNG) reserves. Royal Dutch Shell and Norwegian company Equinor have been planning to build an LNG terminal at Lindi in southern Tanzania since 2014.

Wentworth says that since 2007, natural gas from Mnazi Bay has displaced 121m litres of diesel and heavy fuel oil. The extension of gas provision can facilitate the adoption of renewable energy in Tanzania, Roe says. Gas also reduces dependency on hydropower, which leaves generation subject to the country’s recurring droughts.

Further in-country exploration is on the cards for Wentworth.

• “We are committed to finding and producing more gas in Tanzania,” Roe says. “We’ve got an opportunity to grab.” The company is also willing to consider renewable energy projects in the country.
• Still, it’s possible that opportunities could arise which would fit a broader strategy in east Africa. “Jurisdictional diversification is also something to consider.”

The Bottom Line

Wentworth is confident enough of Tanzania’s future under Hassan to seek in-country rather than international diversification.